SAN JOSE, Calif.--(BUSINESS WIRE)--eBay Inc. (Nasdaq: EBAY) today announced that it has issued the
following letter to its shareholders. The company also said it has filed
a definitive proxy statement with the Securities and Exchange Commission
(“SEC”) with respect to eBay’s 2014 Annual Meeting of Stockholders, to
be held on May 13, 2014.

“Our shareholders and our customers are best served by keeping PayPal
and eBay together,” eBay’s Board of Directors said. “No other payments
competitor has achieved PayPal’s success—because no other competitor has
had a commerce platform like eBay.”

The company reiterated five key reasons why PayPal and eBay are better
together:

PayPal Grows Faster Because of eBay

eBay Accelerates the Success of PayPal

Data Sharing Leads to More Profitable Growth

eBay Inc. Provides Efficient Capital for PayPal

Commerce and Payments are Converging

The full text of the letter is below.

March 24, 2014

Dear Fellow Shareholder:

Our company is a global commerce and payments leader operating in a
rapidly changing landscape. Technology is creating a commerce
revolution. The distinctions between online and offline commerce are
disappearing. Mobile commerce is shifting consumer behavior. And
retailers and brands of all sizes are adapting and innovating to engage
consumers who have unprecedented choice in how they shop and pay.
Scalable, flexible, integrated digital payments and commerce platforms
are competitive advantages in this dynamic environment. That’s why we
believe eBay Inc. is well positioned to lead and innovate globally,
drive long-term growth and deliver sustainable shareholder value.

eBay’s Board of Directors and management team are singularly focused on
doing just that – driving growth and increasing the value of your eBay
investment over the long-term.

At our 2014 annual meeting, you have important choices to make. Activist
investor and eBay shareholder Carl Icahn has submitted a non-binding
proposal to spin off PayPal into a separately traded public company. He
also has nominated two of his employees for election to eBay's board.

We have evaluated carefully Mr. Icahn’s proposal to spin off PayPal. We
do not support it. Mr. Icahn’s proposal is not a new idea, and Mr. Icahn
himself recently backed away from supporting his own proposal. The eBay
Inc. Board of Directors has previously considered this idea closely. We
also have had many discussions with shareholders. Our board is in
unanimous agreement that neither Mr. Icahn's breakup proposal nor his
nominees are in the best interests of eBay's shareholders. The eBay
Board of Directors unanimously recommends that shareholders vote “AGAINST”
Mr. Icahn's breakup proposal and “FOR” all four of the company’s
experienced and highly qualified director nominees: Fred Anderson,
Edward Barnholt, Scott Cook, and John Donahoe.

PayPal and eBay are better together. That’s been true for the past five
years, during which time PayPal and eBay have generated a 441%
increase in share price for our investors, significantly outpacing
NASDAQ and the S&P. And we continue to believe today that PayPal and
eBay together is the best path to creating sustainable shareholder value
in the future. In today’s competitive environment, the advantages of
PayPal and eBay together are more important than ever.

The eBay Story – Creating Value for Shareholders

Since our founding in 1995, eBay has been a leading global innovator in
online commerce and digital payments, and the company has continually
evolved to create and capitalize on technology-driven changes affecting
the future of commerce and how consumers shop and pay. The board has
engaged in constant dialogue with management about eBay’s strategic
direction and has a clear track record of making the right decisions for
eBay and its shareholders.

Chart 4: eBay Inc. Shareholder Performance Over Three Years and
Five Years

Through our eBay Marketplaces, PayPal, and eBay Enterprise business
units, our company has built a highly competitive portfolio of leading
global commerce and payments capabilities. In 2013, enabled commerce
volume across our platforms reached $212 billion, up 21% from the prior
year.

Payments is an integral part of commerce. Technology, led by mobile, is
creating a convergence of payments and commerce capabilities across our
industry. eBay Inc. is a leader in this evolving competitive
environment. And since its acquisition in 2002, PayPal has thrived as
part of eBay Inc., becoming a global leader in digital payments.

PayPal and eBay together have enabled us to drive mobile commerce and
payments leadership, a competitive strength given the role mobile is
playing in altering the commerce landscape. In 2009, we launched an
aggressive push into the nascent mobile commerce space. eBay mobile was
an early leader, and the eBay mobile app has been downloaded more than
186 million times since launch. In the three-year period 2010-2013,
PayPal’s mobile payments volume increased 36 times. Today, our company
is a clear leader, with eBay reaching $22 billion and PayPal hitting $27
billion in mobile commerce volume in 2013.

As we compete in the $10 trillion commerce market, we believe that the
opportunity for dramatic growth for eBay and its shareholders is larger
than ever before. Some of the most important trends in commerce –
including online/offline convergence, mobile, social, data, the app
economy, evolving payment systems – align with eBay assets and position
us well for the future. Our 2013 performance, including 14%
year-over-year revenue growth, 15% year-over-year non-GAAP earnings per
share growth and $3.7 billion in free cash flow, demonstrate we are on
the right path.

The eBay Board – The Right Team to Lead eBay into the Future

We’ve been able to build this thriving business thanks to our high
quality management team and board. This is a group with deep experience
in technology and financial services, a track record of tremendous value
creation and significant ownership in the company. They have unrivaled
experience and strong track records in and outside of eBay. And each has
helped lead meaningful shareholder value creation during their tenure.

John Donahoe became CEO of eBay in 2008 and immediately ushered in a
series of changes that transformed both the company's leadership team
and its strategic position. Prior to joining the company in 2005, John
led global management consulting firm Bain & Company. Over the past
five years, John has lifted eBay annual revenues 88%, total payment
volume 199% and share price 441%.

Fred D. Anderson is co-founder and managing director of the private
equity firm Elevation Partners. He previously served as CFO of Apple,
where he was considered to be one of the driving forces behind Apple's
turnaround. During his tenure at Apple, its stock price increased by
over 1,000%. He has helped eBay focus on efficient, low-cost funding
of PayPal's growth domestically, including through the use of offshore
cash.

Marc L. Andreessen is co-founder of the venture firm Andreessen
Horowitz. He's among the Internet's founding fathers, as a creator of
the pioneering Mosaic Web browser and co-founder of Netscape. Marc is
sought out by many for his entrepreneurial background, his views of
the evolving technology landscape and his investment acumen - he also
serves on the boards of Hewlett-Packard and Facebook - and has
contributed to helping us innovate and develop our leading technology
platforms, acquire companies, and grow our business.

Edward W. Barnholt served as President and CEO of Agilent
Technologies, a provider of test and measurement equipment, from May
1999 until his retirement in March 2005. He executed one of the
largest value-generative technology separation transactions in history
- the spinoff of Agilent from HP.

Scott D. Cook founded the tax and accounting software company Intuit,
where he served as President and CEO from 1984 until 1994. Under
Scott's leadership, Intuit's revenues grew over 3,000% since its IPO.

William C. Ford Jr. has been executive chairman of Ford Motor Company
since September 2006 and was CEO of Ford from 2001 to 2006. Ford
successfully navigated the financial crisis and emerged stronger than
ever, having made tough but necessary restructuring choices before
going into the downturn.

Kathleen C. Mitic is founder and CEO of Sitch Inc. (formerly Three Koi
Labs), a mobile startup. She previously held executive roles at
leading technology firms such as Facebook, Palm, Zazzle and Yahoo.

David M. Moffett was CEO of U.S. Bancorp from 1993 to 2007, where he
was known for delivering prudent, long-term growth. He was asked to
join Freddie Mac by the Federal Housing Finance Agency in late 2008
and helped them navigate the fiscal crisis until his retirement a year
later.

Pierre M. Omidyar founded eBay. He is still our largest shareholder,
owning 8.5% of the company, and has established a framework on which
eBay has delivered long-term shareholder value.

Richard T. Schlosberg III was President and CEO of the David and
Lucile Packard Foundation from 1999 until retirement in 2004. Prior to
joining the foundation, he was Executive Vice President and Director
of The Times Mirror Company, a media communications company, and
Publisher and Chief Executive Officer of The Los Angeles Times. His
investment expertise, derived from investing for the Foundation, has
helped us identify and cultivate investments that can enhance or
accelerate eBay's offerings in strategic areas and his knowledge and
expertise in the communications industry is relevant to eBay's
classified business.

Thomas J. Tierney was the CEO of Bain & Company for over eight years,
is co-founder of the Bridgespan Group, a non-profit advisor to
philanthropic organizations, and a renowned author and expert on
organizational leadership. He has helped us develop our talented eBay
management team and has provided leadership to eBay and the board.

This exceptional board of entrepreneurs, executives and investors has a
track record of taking decisive action, leading 37 acquisitions at eBay
since 2008 as well as value-enhancing transactions as executives at
their respective firms. The board has built a deep and strong management
team that has driven eBay's consistent growth in revenue and
profitability and that continues to deliver sustainable value to eBay
shareholders.

The board has supported the management team in our turnaround and growth
strategies. Over the past several years the board and management:

Transformed eBay into a leading global commerce and payments company;

Invested heavily in driving PayPal to a leadership position in digital
and mobile payments. This includes expanding PayPal's global
footprint, accelerating growth off of eBay, and making strategic
acquisitions such as Bill Me Later and Braintree, which extend
PayPal's product lines into important adjacent areas;

Successfully transformed eBay Marketplaces from its traditional
auction format to a more competitive, sustainable focus on fixed-price
goods;

Forged partnerships with leading retailers and brands;

Enhanced the company's technology and innovation capabilities through
acquisitions; and

Made tough calls, reducing headcount, selling off underperforming
assets and divesting Skype, a promising service that did not have the
synergies with our core business that we had originally expected when
we bought it.

At the same time, we’ve invested in new capabilities for the
Marketplaces business. And we have moved aggressively to leverage
PayPal’s integration with eBay to expand PayPal’s reach to millions of
online retailers and to offline transactions. PayPal remains one of the
fastest growing elements of the company – which helps explain why others
are targeting the payments business but are far behind PayPal.

eBay and PayPal – Better Together

Our shareholders and our customers are best served by keeping PayPal and
eBay together. No other payments competitor has achieved PayPal’s
success – because no other competitor has had a commerce platform like
eBay.

Why We Are Better Together:

PayPal Grows Faster Because of eBay

eBay Accelerates the Success of PayPal

Data Sharing Leads to More Profitable Growth

eBay Inc. Provides Efficient Capital for PayPal

Commerce and Payments are Converging

Our commerce and payments businesses reinforce and support each other.
Taking them apart would destroy value by reducing their considerable
synergies, which cannot be easily replaced by arm’s length commercial
agreements. Tightly integrated with eBay, PayPal can grow faster and
more profitably than it would as a standalone company. Adoption and use
of PayPal on eBay enables innovation and growth off of eBay. For
example, eBay delivers about 30% of PayPal’s new users at virtually no
cost, more than 30% of PayPal’s revenues and approximately 50% of
PayPal’s profits. PayPal’s growth and leadership in mobile payments has
occurred precisely because of this strong base of PayPal users on eBay.

As the commerce landscape evolves, we see even stronger synergies
between PayPal and eBay. New users in the BRIC and emerging markets are
an exciting part of this changing landscape. When PayPal expands into a
new market like Russia or Brazil, established eBay customers provide
PayPal a strong foundation to build a vibrant domestic business. Offline
commerce is another new frontier for both eBay and PayPal, and moving
offline together creates more powerful competitive advantages. Both
businesses benefit from strong investment synergies in key areas of
innovation, and the mobile-enabled commerce and payments markets remain
vast and exciting opportunities.

We do not have a monopoly on good ideas. We know that. And we understand
that we are operating in a dynamic environment. But Mr. Icahn is
proposing nothing new. We have tested the idea of separation. Our board
regularly reviews our businesses to determine the best course of action
for the future. We have come to the conclusion that keeping PayPal as
part of eBay is the right plan for today. However, as we have always
done, we will continue reviewing the strategy and structure of our
company with the best long-term interests of our shareholders clearly in
mind.

Carl Icahn’s Shareholder Proposal and Proxy Fight

Mr. Icahn has nominated to your board two of his employees, Jonathan
Christodoro and Daniel Ninivaggi, who have no relevant leadership or
operational experience in technology. Both are overboarded under eBay's
policies – both of them are already on four public company boards, and
Mr. Ninivaggi is a Co-CEO of one of Mr. Icahn’s controlled companies.
Mr. Christodoro is a recent graduate of business school with a few years
of experience on Wall Street. He joined all four of his boards following
Icahn pressure on those companies and has less than one year on average
of experience on each board he has served on. Both individuals are
contractually bound to Icahn affiliates and are required to hold
business opportunities and investments in a fiduciary capacity for the
benefit of those Icahn affiliates, preventing them from being truly
independent directors. Mr. Icahn appears to have put little
consideration into his selection of nominees to the eBay board, and we
encourage shareholders to reject his unqualified nominees.

Rather than debate the merits of his proposal, Mr. Icahn has launched an
aggressive media campaign to attack the management and directors of
eBay. His distorted attacks, despite being the centerpiece of his
campaign, have been disproven by the facts. Mr. Icahn has a long history
of using personal attacks as a means to his own ends. We believe his
public attacks have been counterproductive and are an attempt to
distract attention from eBay’s long track record of delivering results
for eBay’s shareholders.

More recently, Mr. Icahn has backed away from his proposal to spin off
PayPal into a separately traded public company and from his arguments
that PayPal would be more successful as a standalone company. He has
announced a “new” idea – a carve-out IPO of PayPal. We’re glad to see
that Mr. Icahn now seems to agree that a full separation of PayPal is
not a good idea.

We are fully committed to always acting in the best long-term interests
of our shareholders. We ask ourselves: Will a spinoff into a separately
traded public company or even a partial spin make PayPal more
competitive? Will it accelerate growth? Will it be possible without
distracting PayPal’s innovation and execution at a critically important
time? And, importantly, will it create sustainable value for
shareholders over time? Today, we believe the answer to these questions
is no – not now. PayPal and eBay are better together. In the future, our
board will continue to evaluate all strategic options and make the right
decisions for shareholders.

The bottom line is that Mr. Icahn is wrong about the quality of our
board and he’s wrong about the best course today for PayPal. We oppose
his unqualified board nominees, and we recommend that shareholders vote
against his non-binding proposal to separate PayPal from eBay.

Your board seeks your support electing the company’s four experienced
nominees -- business leaders in technology with track records of
delivering substantial shareholder value who have helped build the eBay
success story -- on the WHITE proxy card: Fred Anderson, Edward
Barnholt, Scott Cook, and John Donahoe. Please discard any proxy card
sent to you by Mr. Icahn.

We are highly confident that eBay will remain a global leader in a
connected commerce world. We believe PayPal will grow faster as part of
eBay, and that eBay grows faster having PayPal. eBay’s strong
positioning will benefit our customers, our employees, and you, our
stockholders.

On behalf of your Board of Directors, we thank you for your continued
support.

Sincerely,

Pierre Omidyar

Thomas Tierney

John Donahoe

Chairman of the Board

Lead Independent Director

CEO

Non-GAAP Financial Measures

This communication includes the following financial measures defined as
“non-GAAP financial measures” by the Securities and Exchange Commission
(SEC): non-GAAP earnings per share and free cash flow. These measures
may be different from non-GAAP financial measures used by other
companies. The presentation of this financial information, which is not
prepared under any comprehensive set of accounting rules or principles,
is not intended to be considered in isolation of, or as a substitute
for, the financial information prepared and presented in accordance with
generally accepted accounting principles (GAAP). For a reconciliation of
these non-GAAP financial measures to the nearest comparable GAAP
measures, see the Appendix to this communication.

Forward-Looking Statements

This communication contains forward-looking statements relating to,
among other things, the future performance of eBay and its consolidated
subsidiaries that are based on the company's current expectations,
forecasts and assumptions and involve risks and uncertainties. These
statements include, but are not limited to, statements regarding
expected financial results for the first quarter and full year 2014; the
company's projected financial outlook for 2015; the future growth in the
Payments, Marketplaces and Enterprise businesses and the company’s plans
with respect to each of those businesses, mobile payments, mobile
commerce; and the company's plans regarding its stock repurchase
programs. The company's actual results could differ materially from
those predicted or implied and reported results should not be considered
as an indication of future performance. Factors that could cause or
contribute to such differences include, but are not limited to: changes
in political, business and economic conditions, including any continuing
U.S. government shutdown or default, any European or general economic
downturn or crisis and any conditions that affect ecommerce growth;
fluctuations in foreign currency exchange rates; the company's need to
successfully react to the increasing importance of mobile payments and
mobile commerce and the increasing social aspect of commerce; the
company's ability to deal with the increasingly competitive ecommerce
environment, including competition for its sellers from other trading
sites and other means of selling, and competition for its buyers from
other merchants, online and offline; the company's need to manage an
increasingly large enterprise with a broad range of businesses of
varying degrees of maturity and in many different geographies; the
effect of management changes and business initiatives; the company's
need and ability to manage other regulatory, tax and litigation risks as
its services are offered in more jurisdictions and applicable laws
become more restrictive; any changes the company may make to its product
offerings; the competitive, regulatory, credit card association-related
and other risks specific to PayPal and Bill Me Later, especially as
PayPal continues to expand geographically and introduce new products and
as new laws and regulations related to financial services companies come
into effect; the company's ability to timely upgrade and develop its
technology systems, infrastructure and customer service capabilities,
including our Enterprise Commerce Technologies, at reasonable cost; the
company's ability to maintain site stability and performance on all of
its sites while adding new products and features in a timely fashion;
the company's ability to profitably integrate, manage and grow
businesses that have been acquired or may be acquired in the future; the
effect the announcement of the shareholder proposal and nominations may
have on the company’s relationships with its shareholders and other
constituencies and on the company’s ongoing business operations. The
forward-looking statements in this communication do not include the
potential impact of any acquisitions or divestitures that may be
announced and/or completed after the date hereof.

More information about factors that could affect the company's operating
results is included under the captions “Risk Factors” and “Management's
Discussion and Analysis of Financial Condition and Results of
Operations” in the company's most recent annual report on Form 10-K, a
copy of which may be obtained by visiting the company's Investor
Relations website at http://investor.ebayinc.com
or the SEC's website at http://www.sec.gov.
Undue reliance should not be placed on the forward-looking statements in
this communication, which are based on information available to the
company on the date hereof. The company assumes no obligation to update
such statements.

Amortization of acquired intangible assets within cost of net
revenues

-

-

-

17,851

19,625

29,225

52,052

40,156

61,039

78,099

77,466

Amortization of acquired intangible assets within operating expenses

50,659

65,927

128,941

197,078

204,104

234,916

262,686

189,727

267,374

334,601

318,347

Other

-

-

-

-

1,390,938

49,119

381,386

21,719

57,582

29,387

2,303

Non-GAAP Operating Income

694,982

1,148,480

1,615,434

1,960,614

2,536,532

2,744,128

2,553,042

2,700,508

3,234,006

3,841,150

4,407,425

Non-GAAP Operating Margin

32.1%

35.1%

35.5%

32.8%

33.1%

32.1%

29.3%

29.5%

27.8%

27.3%

27.5%

GAAP Net Income

441,771

778,223

1,082,043

1,125,639

348,251

1,779,474

2,389,096

1,800,962

3,229,388

2,609,440

2,856,078

Stock-based compensation expense

5,492

5,832

31,772

317,410

301,813

352,042

394,808

381,490

457,186

487,646

608,742

Employer payroll taxes on stock-based compensation

9,590

17,479

13,014

5,319

6,872

3,144

5,345

13,845

17,334

22,934

29,144

Amortization of acquired intangible assets within cost of net
revenues

-

-

-

17,851

19,625

29,225

52,052

40,156

61,039

78,099

77,466

Amortization of acquired intangible assets within operating expenses

50,659

65,927

128,941

197,078

204,104

234,916

262,686

189,727

267,374

334,601

318,347

Other

-

-

-

-

1,390,938

49,119

381,386

21,719

57,582

29,387

2,303

Interest and other income, net

(979)

(6,485)

(2,260)

-

-

-

-

53,857

(1,445,358)

(141,188)

(88,149)

Impairment of certain equity investments

1,230

-

-

-

-

-

-

-

-

-

-

Income taxes associated with certain non-GAAP entries

(18,595)

(31,520)

(50,517)

(171,690)

(165,421)

(202,975)

(12,067)

(202,760)

23,006

(321,260)

(248,374)

Cumulative effect of accounting change, net of tax

5,413

-

-

-

-

-

-

-

-

-

-

Non-GAAP Net Income

494,581

829,456

1,202,993

1,491,607

2,106,182

2,244,945

3,473,306

2,298,996

2,667,551

3,099,659

3,555,557

Diluted net income per share:

GAAP

$0.67

$1.14

$0.78

$0.79

$0.25

$1.36

$1.83

$1.36

$2.46

$1.99

$2.18

Non-GAAP

$0.75

$1.21

$0.86

$1.05

$1.53

$1.71

$2.66

$1.73

$2.03

$2.36

$2.71

Shares used in GAAP diluted net income per share calculation

656,657

683,860

1,393,875

1,425,472

1,376,174

1,312,608

1,304,981

1,327,417

1,312,950

1,312,556

1,312,733

Shares used in Non-GAAP diluted net income per share calculation

656,657

683,860

1,393,875

1,425,472

1,376,174

1,312,608

1,304,981

1,327,417

1,312,950

1,312,556

1,312,733

($ In millions)

FY 03

FY 04

FY 05

FY 06

FY 07

FY 08

FY 09

FY 10

FY 11

FY 12

FY 13

Free Cash Flow

GAAP operating cash flow

$874

$1,285

$2,010

$2,248

$2,641

$2,882

$2,908

$2,746

$3,274

$3,838

$4,995

Purchases of property and equipment, net

(365)

(293)

(338)

(515)

(454)

(566)

(567)

(724)

(963)

(1,257)

(1,250)

Free cash flow

509

992

1,672

1,732

2,187

2,316

2,341

2,022

2,311

2,581

3,745

About eBay Inc.

eBay Inc. (NASDAQ: EBAY) is a global commerce and payments leader,
providing a robust platform where merchants of all sizes can compete and
win. Founded in 1995 in San Jose, Calif., eBay Inc. connects millions of
buyers and sellers and enabled $212 billion of commerce volume in 2013.
We do so through eBay, one of the world's largest online marketplaces,
which allows users to buy and sell in nearly every country on earth;
through PayPal, which enables individuals and businesses to securely,
easily and quickly send and receive digital payments; and through eBay
Enterprise, which enables omnichannel commerce, multichannel retailing
and digital marketing for global enterprises in the U.S. and
internationally. We also reach millions through specialized marketplaces
such as StubHub, the world's largest ticket marketplace, and eBay
classifieds sites, which together have a presence in more than 1,000
cities around the world. For more information about the company and its
global portfolio of online brands, visit www.ebayinc.com.